Designed Chaos - An interview with David
Kelley, founder and CEO of IDEO

With a formula for innovation and a hands-off
management style, David Kelley and his teams at IDEO have developed some of the
most commonly used products in America.

Walk into any bookstore, and you'll find countless numbers
of books on innovation. In many of them you'll find chapters detailing a man
named David Kelley, and his company, IDEO Product Development. Kelley has
become somewhat of a poster child for innovation in America for two reasons:
His engineering firm serves as the brains behind many of today's most
innovative products, and IDEO (Greek for idea) has been a trendsetter in
modern-day corporate management. With a uniquely un-structured approach,
corporate leaders around the country are citing the Palo Alto, Calif.-based
company's success as evidence of a new way to enhance creative thought and
increase productivity in its workers. Called "employee empowerment,"
this new management style is taking the corporate world be storm.

Kelley, the founder and CEO of IDEO, is a forty something
man who serves as a tenured professor of engineering at Stanford University,
while overseeing his seemingly unorganized company. At IDEO, there is no
corporate hierarchy and no management structure. Employees are invited, not
ordered, to attend meetings. Those same employees can also decide where they
want to work and can tell the CEO what they really think of his ideas. However,
out of this chaos has come products that have made a deep impact on society.
That mouse you're using to scroll through this story is a Kelley-and-friends
invention. That squeezable toothpaste container you used when you brushed your
teeth today came from IDEO minds. Those new Nike sneakers you just bought also
have the IDEO stamp on them.

With all this success and a rapidly growing reputation as a
master innovator, suddenly, everyone wants to be like Kelley.

"[Innovation] is where America's self-image comes
from," says Kelley. "I was thinking the other day, you have Italian
shoes, French wines, Japanese electronics and American what? American what,
always comes back to something creative — movies, inventions, etc. So, I think
it's a good fit for the U.S. to focus on [innovation]. America is feeling
confident [in the economy], and that's a really good time to start feeling
innovative."

With American industry looking to turn more creative, they
are naturally turning to Kelley, who has been creating many of the products you
use for more than 25 years. Today, he and IDEO are a hotter property than ever,
not just for the products they can develop, but for the corporate organization
model that seems to inspire such richly creative people.

Flight of Fancy

Kelley started IDEO without even knowing that he was
starting it. A Midwesterner, he came to the San Francisco Bay area in 1975 to
enroll in Stanford's doctoral product design program with the idea of teaching
and escaping his frustration with his past corporate life. After graduating
from Carnegie-Mellon University in Pittsburgh, he worked as both an electrical and
mechanical engineer with The Boeing Company and National Cash Register.

"I could see that I wasn't going to be successful in
that environment," he recalls. "[Corporate life] was oppressive. You
had to sort of stand in line and you could feel the weight of the
organizational chart. My boss was a person I didn't know, who was making
decisions about my life. You work 10-and 12-hour days and end up spending most
of your life with people you don't really choose to be with. I couldn't stand
the structure of big companies."

While he studied at Stanford, he became enamored with the
concept of creative engineering. He was particularly drawn to the notion of
using his skills in various types of projects, instead of one specific field.
"It became really exciting," he says. "They'd be doing some kind
of medical product, then a reading machine for the blind, and then
computers."

In the late '70s, Silicon Valley was emerging as a heaven
for creative engineers. Full of small upstart companies, the budding computer
industry was in dire need of people who could help develop innovative products
that could give each company a leg up on the

competition. Many of those companies began soliciting cheap
help from the Stanford students. Kelley was pleased to oblige.

"They always needed somebody to help with making
electronics or mechanical

designs," Kelley remembers. "I thought, this would make a great business."

Kelley started consulting for several of the companies and
gained a reputation as a creative thinker. Eventually, the phone was ringing
off the hook. One of the companies that came calling was a startup named Apple Computers.
The company's CEO, Steve Jobs, a virtual unknown at the time, asked Kelley to
design a computer hardware device that could control a cursor. Kelley solicited
help for the project from a friend at Stanford,

and both the mouse and IDEO were developed. Kelley and his
friends went on to do more work for Apple, including the Macintosh.

"When you've got a guy like Steve Jobs, who is
incredibly demanding, you end up

doing really good work," Kelley admits. "So it was
a big break for us, and the phone started ringing with offers from companies in
all types of industries. From a design standpoint, everybody wanted to know who
was doing the work for Apple."

Eventually, the work got too demanding for Kelley to
concentrate on his school work. Luckily, Stanford offered him a teaching
position before he received his doctorate, allowing him to teach and find free
time for consulting.

When he began teaching, which he still does today, he
started to build IDEO into a formidable product design firm. In the early days,
he hired only a few of his friends from Stanford, and ran the company out of a
one-room office atop a clothing store in Palo Alto.

Today, the company has more than 300 employees and offices
scattered throughout the world. While still privately held, Kelley says that
the company has revenues estimated at about $50 million annually.

Just the
Right Chaos

When Kelley began his company, he was determined to forego
the structural demands of the corporations for which he had worked. His first
order of business was to create an environment in which his workers would be
happy and free to think creatively. So he refused to install a management hierarchy.
Mostly, Kelley's style is hands-off, allowing employees to become their own
bosses.

"For the self-motivated people, [this approach] allows
them do much more spectacular things than if you 'manage' them," he
theorizes. "Why would I be smarter at figuring out what they ought to do
than they would be?"

Why does his theory work? Mainly it's because of Kelley's
hiring practices and the companies overall culture. IDEO doesn't hire just
anyone. Kelley insists that employees be known and respected by their peers. "When
your problem is a fit into the company culture, then you tend to hire people
you know," he says. "The problem with a super-loose, hands-off
management style is that if you don't fit in, you can hide and float and not be
productive. So we have to be careful about hiring."

In its nearly 20-year existence, IDEO has had a very low
turnover rate, according to Kelley. Mainly, he says, it is because everyone
feels some type of ownership in the company and fits in well with their
co-workers. Instead of specifically focused division within the corporation,
Kelley has set up a new type of structure for his company, which feeds into
that camaraderie. Nowadays, IDEO is broken up into "sub-divisions"
called studios. A studio contains approximately 25 workers. There is a studio
head for each, but that person runs it very "autonomously," says
Kelley. The head isn't much different than any other worker, and Kelley says
it's really just a person to organize administrative duties.

"When you get down to 25 people, you don't have to have
many rules," says Kelley. "We don't have problems with mundane things
like whether or not you can bring your spouse to a company function. Those
questions never come up, because nobody's looking for policies. They already
know the right answer."

Corporate decisions that need to be made are done by a
roundtable of the studio heads. That way, he says, no one in the company is
more than one step away from the process. Anyone in a studio can bring an issue
to a roundtable discussion via his or her studio head. Decisions within an
individual studio are made in a democratic process between those workers only,
so often each studio at IDEO runs much differently than the others.

Kelley has reluctantly installed a bit of structure as his
company has grown, which is manifested in a position called the project leader
— a move that was required because of the nature of the work being taken on.
It's become the most sought-after position in the company, because the project
leader generally gets to decide what the future of a product will become.

"It's because the projects are getting bigger,"
says Kelley of the new positions. "We used to just get the engineering or
the design work. Now we get the whole project, so it requires so many people
that it's necessary to coordinate with a leader." He also says it often
keeps the client happy.

A project leader, however, doesn't take on much of a
managerial role. In fact, it isn't even a permanent title. Employees who serve
as project leader on one project often serve under another for a different
project. The position rotates based upon availability and skills related to the
project.

"It explodes right after the project is over,"
explains Kelley. "If you're a leader on one project, the person working
for you may be your leader on the next project."

Helping
One Another

Another alternative aspect of IDEO's structure, or lack
thereof, is that employees can change positions at will. IDEO's
"swap" program allows workers to avoid burnout or boredom by
switching jobs, locations and, in effect, lives with another employee.

"They have to talk someone in another office into
swapping with them," explains Kelley. "They can go to Tokyo and have
that life experience or London. They can get see what else is out there in the
world and know they can come back."

Swapping workers often switch homes, as well. Kelley says
the program often makes his workers better designers because they get exposed
to broader things: cultures, languages, customs. He originally thought single
workers would be the ones doing the most swapping, but has found that many of
the married workers with small children have taken advantage of it.

IDEO employees also get to pick a co-worker, instead of a
supervisor, to dole out their annual review. Kelley believes that works realize
that they can fool their boss, but they can't fool their fellow workers, so if
they really want good feedback on what

they're good at and what they can improve on, it's from
their peers.

Kelley admits that, in the beginning, people tended to pick
the nicest person they could find. "You don't actually improve that
way," Kelley says. Now, they go after the most critical person. "If
you truly believe that reviews are for help, than you have to go to the people
who really know and truly want to help you."

There are also no meetings at IDEO. Most
"meetings" are labeled "idea sessions" that require an
invitation and are usually held on spur-of-the-moment decisions. Even Kelley
himself is not always invited since the sessions are intended for brainstorming
and are attended only by people who can voice an opinion on that particular
subject.

Becoming
an Innovator

Management structure aside, people are watching IDEO more
for the innovations that it has made, and the innovations it can make for other
companies in the future. Kelley calls it "cross-fertilization technology brokering,"
and it is what has led to IDEO's success.

"Inevitably, we hear the same thing from everybody that
comes into our offices. They all say to us, 'We want to become more innovative,'"
he says. With the wave of innovation sweeping through the world,
cross-fertilization — the process of brainstorming to come up with an idea used
in another project to enhance a current project — has become an increasingly
more important aspect of IDEO's culture.

"We have the advantage of working in multiple
industries," says Kelley. "Let's say we're working on a chair, but
we've learned something in the automobile industry before. Maybe we learned
about a certain kind of spring in the automobile industry. We just
cross-pollinate that into the chair, and now we have an innovation in the
furniture industry."

Kelley says that other companies who concentrate on one area
of expertise are at a disadvantage because they may not learn about useful
technologies from other industries.

"It really makes you look smart, but all it is is a
broad exposure," he admits. With a fast-spreading reputation for
innovative work, IDEO is expected to keep growing strong, even though Kelley
says it's not a goal. Although he has often been quoted as saying that his
company will not grow too big, he now says that he won't purposely keep it from
growing. "That would be the kiss of death," he says.

As the company continues on its path of innovation, Kelley
says that the non-structure of the company will remain intact. "I believe
that the breaking down into the studios has kept the culture we enjoy while we
keep growing," he says. But he also believes that the culture will limit
growth to a point somewhere down the road.

"We're limited be the number of really good people in
our culture; we won't be able to keep up with all the work because the number
of companies out there that view us as an outside innovative shot in the arm is
extensive."

Success has a price, as well, and some employees have been
lost to too-good-to-pass-up offers from other Silicon Valley technology firms.
Kelley takes the harvesting of his work force in stride, however. He realizes
that the computer companies are getting larger and more competitive, so his
people are ideal targets for companies looking to become the innovation leader
for one of the next century's biggest industries.

As for himself, Kelley says that he enjoys what he's doing,
and it will be hard for him to get bored with it. "It's really been like I
have 20 or 30 different jobs because I'm working with all types of the
companies," he says.

When Kelley does finally call it quits with IDEO, he
believes he will continue teaching at Stanford. In the process, he'll create a
whole new breed of innovative product designers and managers.

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